Economy likely to define Obama presidency

PRESIDENCY IN TRANSITION / NEWS ANALYSIS

Zachary Coile

Published
4:00 am PST, Sunday, November 30, 2008

CHICAGO - NOVEMBER 26: President-elect Barack Obama introduces former Federal Reserve Chairman Paul Volcker (L) as the head of the newly created Economic Recovery Advisory Board during a press conference at the Hilton Hotel November 26, 2008 in Chicago, Illinois. Austan Goolsbee, a senior economic adviser to the Obama campaign, has been named the Economic Recovery Board?s staff director and chief economist.This was Obama?s third press conference in as many days as he works to assemble and introduce his economic team. (Photo by Frank Polich-Pool/Getty Images) less

CHICAGO - NOVEMBER 26: President-elect Barack Obama introduces former Federal Reserve Chairman Paul Volcker (L) as the head of the newly created Economic Recovery Advisory Board during a press conference at ... more

Photo: Pool, Getty Images

Photo: Pool, Getty Images

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CHICAGO - NOVEMBER 26: President-elect Barack Obama introduces former Federal Reserve Chairman Paul Volcker (L) as the head of the newly created Economic Recovery Advisory Board during a press conference at the Hilton Hotel November 26, 2008 in Chicago, Illinois. Austan Goolsbee, a senior economic adviser to the Obama campaign, has been named the Economic Recovery Board?s staff director and chief economist.This was Obama?s third press conference in as many days as he works to assemble and introduce his economic team. (Photo by Frank Polich-Pool/Getty Images) less

CHICAGO - NOVEMBER 26: President-elect Barack Obama introduces former Federal Reserve Chairman Paul Volcker (L) as the head of the newly created Economic Recovery Advisory Board during a press conference at ... more

Photo: Pool, Getty Images

Economy likely to define Obama presidency

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Obama is well aware that his presidency will be judged on whether he is able to breathe life into a seriously ailing economy. If he succeeds, he could be seen as a 21st century FDR. If he fails, he's the new Herbert Hoover, whose ineffectual efforts plunged the country even deeper into depression.

Obama has assigned his economic team to devise a plan to create 2.5 million jobs in the next two years. The centerpiece of his plan is the stimulus package, which House and Senate aides believe is likely to cost between $300 billion and $500 billion. Obama said last week that it must be big enough "so it really gives a jolt to the economy."

Describing his plan, he said, "We'll put people back to work rebuilding our crumbling roads and bridges, modernizing schools that are failing our children and building wind farms and solar panels, fuel-efficient cars and the alternative energy technologies that could free us from our dependence on foreign oil and keep our economy competitive in the years ahead."

The plan may also include aid to states to avoid layoffs that could worsen a downturn, and safety-net measures like increases in food stamps and extending unemployment benefits.

The legislation could be Obama's first chance to meet his pledge to cut taxes for 95 percent of Americans. He's wavering on whether he'll raise taxes on the wealthy - a controversial move in a recession - or just allow President Bush's tax cuts for couples making over $250,000 a year to expire in 2010.

Obama's economic plans, at some point, will run into the realities of a strained U.S. budget. If you include the new proposed stimulus spending, the federal deficit could hit $1.5 trillion next year. While Obama has said that reviving the economy must trump deficit concerns in the short term, the rise in red ink could sharply limit his hand in dealing with other challenges, especially health care reform.